1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to ______________________
Commission File Number 0-5641
CLEVETRUST REALTY INVESTORS
(Exact name of registrant as specified in its charter)
Massachusetts 34-1085584
(State or other jurisdiction of (I. R. S. Employer Identification No.)
incorporation or organization)
2001 Crocker Road, Suite 400
Westlake, Ohio 44145
(Address of Principal Executive Offices) (Zip Code)
(216) 899-0909
(Registrant's telephone number, including area code)
Not Applicable
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-------- --------
Shares of Beneficial Interest Outstanding at May 11, 1995: 5,470,696
The sequential page in this report where the Exhibit Index is located is page
14.
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CLEVETRUST REALTY INVESTORS
INDEX
Sequential
Page
Number
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Statement of Financial Condition
-- March 31, 1995 and September 30, 1994 3
Statement of Operations
-- Three Months and Six Months ended March 31, 1995 and 1994 4
Statement of Cash Flows
-- Six Months ended March 31, 1995 and 1994 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
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CLEVETRUST REALTY INVESTORS
STATEMENT OF FINANCIAL CONDITION
MARCH 31, 1995 SEPTEMBER 30, 1994
-------------- ------------------
(in thousands)
ASSETS
- -----------------------------------------
Invested assets - NOTE B:
Investments in real estate:
Improved properties $62,841 $70,715
Less: Depreciation 21,655 25,648
---------- ----------
41,186 45,067
Land held for sale or development 313 313
---------- ----------
41,499 45,380
Real estate mortgage loans 156 236
---------- ----------
41,655 45,616
Cash and cash equivalents 644 251
Certificate of deposit 0 500
Insurance settlement proceeds - NOTE B 0 3,341
Other assets 1,168 1,296
---------- ----------
TOTAL ASSETS $43,467 $51,004
========== ==========
LIABILITIES
- -----------------------------------------
Mortgage notes payable - NOTE C $10,370 $11,111
Bank notes payable - NOTE D 5,000 11,180
Accrued interest on notes payable 21 27
Accrued fire repairs - NOTE B 1,191 3,341
Accrued expenses and other liabilities 1,603 2,195
---------- ----------
TOTAL LIABILITIES 18,185 27,854
SHAREHOLDERS' EQUITY
- -----------------------------------------
Shares of Beneficial Interest, par value
$1 per Share - NOTE F:
Authorized -- Unlimited
Issued and outstanding shares - 5,470,696 5,471 5,471
Additional paid-in capital 39,794 39,794
Accumulated deficit (19,983) (22,115)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 25,282 23,150
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $43,467 $51,004
========== ==========
<FN>
See notes to financial statements.
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CLEVETRUST REALTY INVESTORS
STATEMENT OF OPERATIONS
The following statement of operations of CleveTrust Realty Investors for the
three-month and six month periods ended March 31, 1995 and 1994, respectively,
are unaudited, but in the opinion of management include all adjust ments
necessary to present fairly the results of operations. All such adjustments
were of a normal recurring nature. The results of operations of the three-month
and six-month periods ended March 31, 1995 are not necessarily
indicative of the results of operations for succeeding periods.
Three Months Ended Six Months Ended
-------------------------- --------------------------
3/31/95 3/31/94 3/31/95 3/31/94
--------- --------- --------- ---------
(in thousands, except per share data)
INCOME
Real estate operations:
Rental Income $2,606 $2,415 $5,221 $4,806
Less: Real estate operating expenses 1,352 1,333 2,723 2,500
Less: Depreciation expense 466 494 958 984
--------- --------- --------- ---------
1,818 1,827 3,681 3,484
--------- --------- --------- ---------
Income from real estate operations 788 588 1,540 1,322
Interest income 5 15 40 26
Other 3 10 19 17
--------- --------- --------- ---------
796 613 1,599 1,365
EXPENSES
Interest:
Mortgage notes payable - NOTE C 266 413 535 833
Bank notes payable - NOTE D 233 110 476 295
--------- --------- --------- ---------
499 523 1,011 1,128
General and administrative 203 196 427 453
--------- --------- --------- ---------
702 719 1,438 1,581
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 94 (106) 161 (216)
Gains on sales of real estate - NOTE B 2,408 361 2,408 361
--------- --------- --------- ---------
NET INCOME $2,502 $255 $2,569 $145
========= ========= ========= =========
Per Share of Beneficial Interest - NOTE H:
Operating income (loss) $0.02 ($0.02) $0.03 ($0.05)
Gains on sales of real estate 0.44 0.07 0.44 0.08
--------- --------- --------- ---------
NET INCOME PER SHARE $0.46 $0.05 $0.47 $0.03
========= ========= ========= =========
Weighted Average Number of Shares of
Beneficial Interest Outstanding 5,471 5,022 5,471 4,363
========= ========= ========= =========
<FN>
See notes to financial statements.
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CLEVETRUST REALTY INVESTORS
STATEMENT OF CASH FLOWS
Six Months Ended
----------------------------------
3/31/95 3/31/94
---------- ----------
(in thousands)
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $2,569 $ 145
Non-cash revenues and expenses included in income:
Depreciation expense 958 984
Decrease in other assets 128 118
(Decrease) in accrued interest on notes payable (6) (35)
(Decrease) in accrued expenses and other liabilities (592) (2)
Reconciliation to net cash flow from operating activities:
Gains on sales of real estate (2,408) (361)
---------- ----------
Cash Flow From Operating Activities 649 849
CASH FLOW FROM INVESTING ACTIVITIES:
Equity investments:
Improvements to existing properties (225) (362)
Proceeds from properties sold 5,556 507
Net insurance proceeds 1,191 0
Real estate mortgage loan repayments 80 150
---------- ----------
Cash Flow From Investing Activities 6,602 295
CASH FLOW FROM FINANCING ACTIVITIES:
Mortgage notes payable:
Principal amortization payments (243) (244)
Principal prepayments (498) 0
Bank notes payable:
Repayments (6,149) (5,162)
Principal amortization payments (31) (100)
Certificates of deposit 500 0
Proceeds from sale of shares of beneficial interest 0 5,905
Distributions to shareholders (437) (293)
---------- ----------
Cash Flow (Used In) From Financing Activities (6,858) 106
---------- ----------
Increase in cash and short-term investments 393 1,250
Balance at beginning of year 251 315
---------- ----------
Balance at end of period $ 644 $1,565
========== ==========
<FN>
See notes to financial statements.
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CLEVETRUST REALTY INVESTORS
NOTES TO FINANCIAL STATEMENTS
March 31, 1995
NOTE A - INCOME TAXES
Commencing with fiscal 1993 the Trust no longer qualified as a REIT with the
change in status to a taxable entity retroactive to October 1, 1992. As of
October 1, 1992 the Trust adopted, Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" ("SFAS 109"). The adoption of SFAS 109
had no effect on net income.
The Trust had no income tax expense for the six month periods ended March 31,
1994 and 1995 or for the fiscal year ended September 30, 1994, and it expects
to have no income tax expense for the fiscal year ended September 30, 1995.
The Trust had a net deferred tax asset position at March 31, 1995 and September
30, 1994 of approximately $3,192,000 and $4,066,000, respectively. The Trust
maintains a valuation reserve equal to its net deferred tax asset as there is
doubt as to whether the net deferred tax asset will be realized.
NOTE B - INVESTMENTS IN REAL ESTATE
On February 28, 1995 the Trust completed a $2,650,000 sale of the 197 room
Quality Hotel located at the airport in St. Louis, Missouri. This sale
resulted in a gain of $452,000.
On March 15, 1995 the Trust completed a $2,595,000 sale of the 224 unit
Parkwood Place Apartments located in Greeley, Colorado. This sale resulted in
a gain of $1,859,000.
On March 20, 1995 the Trust completed an $800,000 sale of the 51,000 square
foot Walnut Hill West office building located in Dallas, Texas. This sale
resulted in a gain of $97,000.
On March 7, 1994 the Trust completed a $834,000 sale of 69.96 acres of vacant
land located in Akron, Ohio. This sale resulted in a gain of $361,000. The
Trust received a purchase money mortgage for $290,000 of the purchase price in
connection with the sale.
On January 18, 1994 the Trust's Petroleum Club Building, located in Tulsa,
Oklahoma, sustained a major fire. In July, 1994 the Trust and its insurance
company agreed on a settlement. The total settlement of $6,025,000 has been
remitted to the Trust by the insurance company. Building repairs and other
costs associated with the fire are currently estimated to be adequately covered
by the settlement. At March 31, 1995 the Trust had $1,191,000 accrued for
repairs and other costs related to the fire. The Trust used $1,191,000 of the
settlement proceeds to make a paydown on its 1994 Credit (see Note C). The
Trust has the ability, subject to the conditions of the loan agreement, to
borrow these funds back, when needed, to make payments for the fire repair work
and other costs associated with the fire.
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CLEVETRUST REALTY INVESTORS
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE C - MORTGAGE NOTES PAYABLE
On March 16, 1995 the Trust repaid a $498,000 first mortgage loan on its
shopping center located in Ardmore, Oklahoma. This loan had a maturity date of
June 16, 1996.
NOTE D - BANK NOTES PAYABLE
On September 30, 1994 the Trust borrowed $7,689,000 under the terms of a demand
note from National City Bank of Cleveland, Ohio ("NCB"). The funds were used
to repay a maturing mortgage loan. This demand note had an interest rate of
prime. This demand note was converted to a revolving line of credit ("1994
Credit") issued by NCB and M & T Bank of Buffalo, New York ("M&T"), which was
signed effective November 30, 1994. The 1994 Credit is for up to $25,000,000
(but is limited by the value of the collateral provided). Of this amount a
maximum of $15,000,000 is currently available and $10,000,000 will be available
upon payment of an activation fee of 3/4 of 1% on the $10,000,000. Interest,
which is at the option of the Trust, will be at either i) 1/4 of 1% over the
prime rate; ii) 250 basis points over the LIBOR rate: or iii) NCB's fixed
interest rate available from time to time. Additionally, a commitment fee of
3/8 of 1% is due on any funds available but not borrowed. Each year the
lenders will review the 1994 Credit with the right to extend it for one
additional year. At March 31, 1995 the outstanding balance was $5,000,000.
The 1994 Credit is secured by certain of the Trust's real estate and contains
certain covenants including a covenant for a minimum shareholders' equity. At
March 31, 1995 the amount of shareholders' equity free from such restrictions
was approximately $5,282,000.
On February 28, 1995 with the proceeds from the sale of the hotel located in
St. Louis, Missouri (see Note B) the Trust made a $2,200,000 paydown on a loan
it had with another bank. On March 15, 1995 with a portion of the proceeds
from the sale of the apartments located in Greeley, Colorado (see Note B) the
Trust paid off the $1,260,000 balance on this loan. This loan had a maturity
date of December 25, 1997. The interest rate was prime plus 1% with a minimum
rate of 7.5%. The Trust was required to make monthly amortization payments
based on a twenty year amortization schedule.
Effective December 31, 1994 the Trust terminated the December 31, 1990 Credit
Agreement ("1990 Credit") it had with Society National Bank. Effective January
1, 1994 the Trust and the lender had amended the 1990 Credit , by converting
the loan to a revolving line of credit. During January and February, 1994 the
Trust paid down the $4,508,000 balance of the 1990 Credit. There were no
borrowings outstanding when the 1990 Credit was terminated.
NOTE F - SHARES OF BENEFICIAL INTEREST
On November 23, 1993 the Trust mailed a prospectus and certificate of rights to
all shareholders of record as of November 12, 1993. The certificate entitled
the shareholder the right to purchase one share of beneficial interest of the
Trust for every two shares that the shareholder owned at a price of $3.25 per
share. Additionally, this offering also provided for an oversubscription
privilege that entitled each holder of a right to subscribe for shares not
purchased by other holders of rights. Oversubscription was to be allocated
prorata based on the number of shares owned should oversubscription requests
exceed the number of shares available. The offering expired January 28, 1994.
All 1,857,969 shares available in the offering were sold. The Trust received
$6,038,000 less estimated expenses of $133,000 or net proceeds of $5,905,000.
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CLEVETRUST REALTY INVESTORS
NOTES TO FINANCIAL STATEMENTS - (Continued)
NOTE G - DISTRIBUTIONS
The Trustees, at their February 21, 1995 meeting, declared a quarterly cash
distribution of $.04 per share payable April 21, 1995 to shareholders of record
as of April 7, 1995. The Trustees at their April 25, 1995 meeting declared a
quarterly cash distribution of $.04 per share payable July 21, 1995 to
shareholders of record as of July 7, 1995.
NOTE H - NET INCOME PER SHARE
Net income per Share of Beneficial Interest has been computed using the
weighted average number of Shares of Beneficial Interest outstanding each
period.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
FINANCIAL CONDITION
At March 31, 1995 the Trust owned $63,154,000 in real estate investments at
cost and had one real estate mortgage loan with a balance of $156,000. These
investments net of accumulated depreciation totaled $41,655,000. This compared
with total real estate investments at cost of $71,028,000, one real estate
mortgage loan with a balance of $236,000 and a carrying value after accumulated
depreciation of $45,616,000 at September 30, 1994. The change since year end
was the net result of the following: (i) the February 28, 1995 sale of the
St. Louis hotel, book value $1,875,000; (ii) the March 15, 1995 sale of the
apartments located in Greeley, Colorado, book value $636,000; (iii) the March
20, 1995 sale of a 51,000 square foot office building located in Dallas, Texas,
book value $637,000; (iv) receiving $80,000 in real estate loan repayments;
(v) spending $225,000 on improvements to existing properties; and (vi)
recording depreciation expense of $958,000.
With the proceeds from the sales of the hotel and the apartments, the Trust
repaid in full the $3,460,000 balance of the loan it had with Ohio Savings
Bank. Additionally, with $1,191,000 of the Insurance Settlement Proceeds which
the Trust had received as a part of the settlement between the Trust and its
insurance company in connection with the January 18, 1994 fire at the Petroleum
Club Building located in Tulsa, Oklahoma (see Note B to the Financial
Statements) and the balance of the proceeds from the sales of the above
referenced properties, the Trust paid down $2,689,000 on its 1994 Credit. The
Trust also repaid in full a $498,000 first mortgage it had on a shopping center
located in Ardmore, Oklahoma.
The $2,132,000 increase in shareholders' equity at March 31, 1995 from
September 30, 1994 was the net effect of the Trust's recording net income of
$2,569,000 and making distributions to shareholders of $437,000 during the six
month period ended March 31, 1995. At March 31, 1995 the Trust's debt to
equity ratio was .61 to 1.00 compared to .96 to 1.00 at September 30, 1994.
RESULTS OF OPERATIONS
Quarter ended March 31, 1995 versus March 31, 1994
Income from real estate operations during the quarter ended March 31, 1995
increased $200,000 (34%) when compared to the quarter ended March 31, 1994.
Rental income for the quarter ended March 31, 1995 increased $191,000 (8%)
compared to the quarter ended March 31, 1994. Real estate operating expenses
increased $19,000 (1%) while depreciation expense declined $28,000 (6%) in the
three months ended March 31, 1995 versus 1994. The primary reason for the
increase in income from real estate operations and rental income is due to the
Trust's purchase in August, 1994 of a 104,000 square foot office building
located in Dallas, Texas. It should be noted that included in the expenses for
the three months ended March 31, 1994 are expenses involved with two fires at
Trust properties. The first was a $50,000 deductible recorded by the Trust in
January, 1994 in connection with the January 18, 1994 fire at the Trust's
Petroleum Club Building located in Tulsa, Oklahoma (see Note B to the financial
statements). The second was an expense of $24,000 recorded in connection with
a fire at the Trust's Hilton Head property. This expense was due to the
repairs necessary to the property being less than the Trust's deductible for
insurance purposes.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS - (CONTINUED)
The $24,000 (4.5%) decrease in interest expense for the three month period
ended March 31, 1995 when compared to the same period one year ago was
primarily due to less borrowings outstanding. During the current three month
period the average monthly debt totaled approximately $18.5 million compared to
an average monthly debt outstanding of approximately $21.6 for the three month
period one year ago. The average interest rate for the current quarter was
approximately 10.8% compared to 9.7% one year ago.
During the three months ended March 31, 1995 the Trust completed three sales,
all of which resulted in gains. The first was the February 28, 1995 $2,650,000
sale of the 197 room Quality Hotel located at the airport in St. Louis,
Missouri. This sale resulted in a gain of $452,000. The second was the March
15, 1995 $2,595,000 sale of the 224 unit Parkwood Place Apartments located in
Greeley, Colorado. This sale resulted in a gain of $1,859,000. The third was
the March 20, 1995 $800,000 sale of the 51,000 square foot Walnut Hill West
office building located in Dallas, Texas. This sale resulted in a gain of
$97,000.
On March 7, 1994 the Trust completed a $834,000 sale of 69.96 acres of vacant
land located in Akron, Ohio. This sale resulted in a gain of $361,000.
Six Months ended March 31, 1995 versus March 31, 1994:
Income from real estate operations in the six months ended March 31, 1995
increased $218,000 (16%) compared to the six months ended March 31, 1994.
Rental income for the six months ended March 31, 1995 increased $415,000 (9%)
when compared to the six months ended March 31, 1994. Real estate operating
expenses during the current six months increased $223,000 (9%) when compared to
the same period one year ago. These increases were primarily due to the
Trust's purchase in August, 1994 of a 104,000 square foot office building
located in Dallas, Texas. Depreciation expense declined $26,000 (3%) when
comparing the two periods.
The $117,000 (10%) decrease in interest expense for the six month period ended
March 31, 1995 when compared to the same period one year ago was primarily due
to less borrowings outstanding. During the current six month period the
monthly average debt outstanding was approximately $20 million compared to an
average monthly debt outstanding of approximately $23.7 million for the
comparable period one year ago. The average interest rate during the current
six month period was 10.1% compared to an average interest rate of 9.5% for the
same period one year ago.
The gains on sales of real estate of $2,408,000 for the six months ended March
31, 1995 and $361,000 for the six months ended March 31, 1994 were discussed
above.
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P A R T I I
Item 1. Legal Proceedings
There are no items or events requiring reporting with respect to this
item.
Item 2. Changes in Securities
There are no items or events requiring reporting with respect to this
item.
Item 3. Defaults upon Senior Securities
There are no items or events requiring reporting with respect to this
item.
Item 4. Submission of Matters to a Vote of Security Holders
The 1995 Annual Meeting of Shareholders of CleveTrust Realty Investors
was held on February 21, 1995 at the Sheraton Cleveland City Centre
Hotel, 777 St. Clair Avenue, Cleveland, Ohio. Proxies for the meeting
were solicited by the Board of Trustees and there was no solicitation
in opposition. Of the 5,470,696 shares eligible to vote, 5,079,853
participated at the meeting. Two matters were presented to a
vote of security holders.
The first matter presented to a vote of security holders was an
amendment to Article X of the Declaration of Trust, to eliminate
classification of Trustees' terms and restore the annual election of
all Trustees. 4,521,803 shares were voted for the amendment, 115,068
shares were voted against it and 442,982 shares abstained or did
not vote.
The second matter presented to a vote of security holders was the
election of six Trustees. For Mr. Howard Amster, 5,031,611 shares were
voted for his election, while 48,242 shares were withheld. For Mr.
Robert H. Kanner, 5,031,611 shares were voted for his election, while
48,242 shares were withheld. For Mr. John C. Kikol, 5,030,111 shares
were voted for his election, while 49,742 shares were withheld. For
Mr. Leighton A. Rosenthall, 5,031,509 shares were voted for his
election, while 48,344 shares were withheld. For Mr. Ludwig Seuffert,
5,031,610 shares were voted for his election, while 48,243 shares were
withheld. For Mr. John D. Weil, 5,031,611 shares were voted for his
election, while 48,242 shares were withheld.
Item 5. Other Information
During the quarter for which this report is filed, CleveTrust Realty
Investors and National City Bank, as Agent and National City Bank and
Manufacturers and Traders Trust Company, as The Banks, executed,
effective April 28, 1995, Amendment To Credit Agreement to the Credit
Agreement, dated as of November 30, 1994. The amendment changes the
allocation of the attributed value of each Class Two Mortgaged
Property and each Class Three Property to 55% from 50%.
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P A R T I I
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit (27): Financial Data Schedule
Exhibit (99): Amendment to Credit Agreement dated effective April 28,
1995 to Credit Agreement dated November 30, 1994, By and Among
CleveTrust Realty Investors, Borrower, National City Bank, as Agent
and The Banks Identified Herein.
(b) There were no Reports on Form 8-K filed during the quarter for
which this report is filed.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLEVETRUST REALTY INVESTORS
(Registrant)
Date: May 11, 1995 By: /s/ John C. Kikol
--------------------------------------
John C. Kikol, President
Date: May 11, 1995 By: /s/ Michael R. Thoms
--------------------------------------
Michael R. Thoms, Vice President
and Treasurer
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CLEVETRUST REALTY INVESTORS
QUARTERLY REPORT ON FORM 10-Q FOR QUARTER ENDED MARCH 31, 1995
EXHIBIT INDEX
"Assigned" "Sequential"
Exhibit No. Description Page No.
- ----------- ----------- --------
(27) Financial Data Schedule. 15
(99) Amendment to Credit Agreement dated effective April 28, 1995 16
to Credit Agreement By and Among CleveTrust Realty Investors,
Borrower, National City Bank, as Agent and The Banks Identified
Herein dated as of November 30, 1994.
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